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Times
10 hours ago
- Business
- Times
AI developing faster than market regulator can make rules, FCA warns
Ever-faster artificial intelligence trading 'bots' may make it harder for regulators to monitor markets and prove when rules are being breached, the boss of the City regulator has warned. Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA) since 2020, said the rising use of AI in the financial world meant that 'clean markets' could be more difficult to achieve in the future. 'What will clean markets mean in the future with more autonomous agents operating, trading at phenomenal speeds across the globe, and how can you prove abuse in that environment? I think that's something that's going to hit us in the next few years,' he said. A 'clean market' is one in which prices are set by genuine supply and demand forces, not by cheating or manipulation. In a clean market every participant — whether that is big banks, hedge funds or retail investors — play by the same rules, have timely access to accurate information and cannot secretly distort prices through tricks such as insider trading, spoofing orders or spreading false rumours.
The Guardian
28-05-2025
- Business
- The Guardian
Starling's profits dip 25% as bank takes blame for Covid loan losses
Digital bank Starling has suffered a 25% drop in annual profits and announced it would turn down government guarantees on £28m of Covid loans losses after conceding its own weak controls were to blame. The admission stirs up a long-running controversy over Starling's handling of the government-backed bounce back loan (BBL) scheme, which was built to get money quickly to small businesses during lockdown. The scheme offered loans of up to £50,000 at 2.5% interest but carried little risk, with taxpayers picking up 100% of losses if the companies defaulted. On Wednesday, Starling's chief executive, Raman Bhatia, said the bank had proactively reviewed some of the BBLs on its books, and conceded that a tranche of loans had been granted to applicants without proper checks. That meant they were unlikely to qualify for government guarantees, which might have otherwise seen taxpayers foot the £28m bill. 'In some cases, we think we may not have met all the procedures, all the requirements, of the scheme,' Bhatia told journalists during the conference call. He did not confirm whether Starling had discovered fraud or financial crime within that tranche of loans. It comes just months after Starling was hit with a separate £29m fine for 'shockingly lax' financial crime controls, which the City regulator said had left the financial system 'wide open to criminals and those subject to sanctions'. Together, the fine and BBL loss reduced Starling's profit for the year to March to £223m, down 25% from £301m a year earlier. Bhatia said the bank may consider cutting or clawing back pay from executives if appropriate. 'We have discharged our duties to consider any impact on [remuneration] where appropriate. I can't share any further details.' It is not clear whether that might impact Starling's founder and former chief executive, Anne Boden, who stepped down in 2023 citing a 'conflict of interest' between being a boss and a large shareholder in the lender. Starling's distribution of Covid loans gained heightened attention in 2022 when former minister Theodore Agnew accused Starling of using the BBL scheme as a 'cost-free marketing exercise to build their loan book and so their company valuation', and failing to properly review borrowers before handing out taxpayer-backed loans. Boden at the time vehemently denied Agnew's claims. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Unlike large lenders, Starling opened BBL applications to new clients and saw its client base swell as a result. Its business customer base grew from 87,000 to 330,000: equivalent to adding 15,000 a month. And while the bank had only issued £23m of its own loans before the pandemic in November 2019, it had distributed £1.6bn in BBLs by the time the scheme closed in March 2021. Commenting on the Financial Conduct Authority (FCA) fine and the BBL loss on Wednesday, Starling's chief financial officer, Declan Ferguson, said: 'We continue to make significant investment into our financial crime resource to ensure our risk management and compliance capabilities are commensurate with the high-growth business and experience. 'Working closely with both the FCA and the British business bank, we have also sought to limit the impact of these issues and ensure they remain one-offs, but now we are now more confident we are moving forward into the next stage of our growth on much stronger foundations.'
